Planning to give something back when you transition out of your business? You may be surprised by your choices – and the difference your donations can make.

Sharing your success

Some of today’s most successful entrepreneurs are known as much for their philanthropy as for their business expertise. But you don’t have to give away millions – or billions – of dollars to make a difference. In fact, the latest figures from Giving Australia show that, in 2016 alone, the combined donations from Australian small and medium businesses (SMBs) totalled an impressive $8.5 billion.

NAB research reveals two further interesting findings: almost one in six (14%) Australian business owners plan to donate money realised from their business, while those aged over 55 contribute more than any other age group. If you’re thinking of giving back when you transition from business ownership, possibly into retirement, these pointers could help you achieve your charitable goals more effectively.

Picking a cause that counts

JBWere’s 2018 The Support Report shows that business owners donate in many different ways. Your options range from economic and social development through to higher education, health and international aid. Many small business owners prefer to focus on their local area by supporting recreation or community sports. Whatever your interests may be, you have plenty of options: there are more than 56,000 registered charities in Australia.

Whether your next move is a new venture, adventure, or retirement, if you’re thinking about where to put your money, it’s natural you’ll look for causes that align with your values. You’ll also want to feel confident that your money will be well spent. The Australian Charities and Not-for-profit Commission (ACNC), is an independent, national charity regulator. They provide a list of things to consider that can help you make an informed decision about which charities to support.

Getting down to detail

One way to make the most of your gift is to put a transition to retirement strategy in place, which can help make sure your legacy is structured in the most effective manner.

Things to think about include the amount you’d like to give, the timeframe for the donation and whether you would like to support the cause on an ongoing basis. With these in mind, you can then consider the most effective way to provide support.

If you’re planning to give a one-off amount, donate for a short period or give less than around $10,000, a direct tax-deductible donation to your preferred cause could be your best option. This is straightforward and is as simple as donating online or writing a cheque.

However, if you’re planning to donate over a longer period of time, a philanthropic structure could be more effective.

For example, a Private Ancillary Fund (PAF) connects donors with organisations able to receive tax-deductible donations, also known as Deductible Gift Recipients (DGRs). This type of fund must have corporate trustees – usually family members with an independent ‘responsible person’. There’s also a Public Ancillary Fund (PuAF), which can collect, hold and distribute gifts to DGRs.

You could also consider creating a testamentary or will trust, a Private Charitable Trust, or a Gift Fund to collect donations. These may be considered income-tax-exempt, though donations to them are not tax deductible.

When choosing the option that works best for you as you transition from business, it’s a good idea to talk to a qualified adviser with experience in this field.

With that done, you can take on your next challenge – whatever it might be – secure in the knowledge that you’ll be maximising the impact of your generosity while putting in place the structure that best fits your needs.

Important information

The information contained in this article is correct as of August 2019 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.

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